The Union Cab­i­net has now cleared an­other am­bi­tious Rs 80 bil­lion debt- re­cast and re­form pack­age to re­vive state util­i­ties called Ujwal Dis­com As­sur­ance Yo­jna ( UDAY). The scheme aims for a fi­nan­cial turn­around of dis­coms by re­duc­ing their in­ter­est cost,

Power Watch India - - COVER STORY -

ers as well as state gen­er­a­tors were feel­ing the heat due to low de­mand, re­sult­ing in lower ca­pac­ity util­i­sa­tion.

Now there is a ray of hope for dis­coms. The cen­tral govern­ment’s ef­fort to im­prove the fi­nan­cial health of power dis­tri­bu­tion com­pa­nies has once again taken shape, with the un­veil­ing of a re­vival pack­age. The Union Cab­i­net has now cleared an­other am­bi­tious Rs 80 bil­lion debt-re­cast and re­form pack­age to re­vive state util­i­ties called Ujwal Dis­com As­sur­ance Yo­jna (UDAY). The scheme aims for a fi­nan­cial turn­around of dis­coms by re­duc­ing their in­ter­est cost, im­prov­ing op­er­a­tional ef­fi­cien­cies, re­duc­tion of cost of power and en­forc­ing fi­nan­cial dis­ci­pline through state fi­nances. This is one of the most sig­nif­i­cant re­forms un­der­taken by the cen­tral govern­ment to fix the fi­nances of some of the most stressed dis­coms and cre­ate an en­abling en­vi­ron­ment for a quick turn­around.

This will al­low states to take over in a graded man­ner the debt of dis­coms, help­ing re­duce their in­ter­est bur­den and al­low­ing them to buy power to en­sure un­in­ter­rupted sup­ply. States have been given strong in­cen­tives such as cheaper power and more coal if they adopt the scheme. The state will have to take 75% of the out­stand­ing debt of ail­ing dis­tri­bu­tion com­pa­nies as on 30 Septem­ber 2015. 50% of the debt is to be taken in the cur­rent fis­cal year i.e. FY 16 and 25% in FY 17. In th­ese two years, this debt will not be added in cal­cu­lat­ing state fis­cal deficit. States will is­sue State De­vel­op­ment bonds in the mar­ket or di­rectly to the re­spec­tive banks or fi­nan­cial In­sti­tu­tions hold­ing the dis­com debt.

State-run Power Fi­nance Cor­po­ra­tion and Ru­ral Elec­tri­fi­ca­tion Cor­po­ra­tion, which have large ex­po­sure to the dis­coms, will not be forced to buy the

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